Mancuso v. Long Beach Acceptance Corp.

• Decision Date: 04 March 2008
• Docket Number: No. WD 68110.,WD 68110.
• Citation: 254 S.W.3d 88
• Parties: Jeanne E. MANCUSO, Appellant, v. LONG BEACH ACCEPTANCE CORPORATION, Respondent.
• Court: Missouri Court of Appeals

254 S.W.3d 88

Jeanne E. MANCUSO, Appellant, v. LONG BEACH ACCEPTANCE CORPORATION, Respondent.

No. WD 68110.

Missouri Court of Appeals, Western District.

March 4, 2008.

Motion for Rehearing and/or Transfer to Supreme Court Denied April 29, 2008.

Application for Transfer Denied June 24, 2008.

Dale K. Irwin, Paul Matthew Tancredi, Kansas City, MO, for Appellant.

Jeffrey John Simon, Kansas City, Mo, for Respondent.

Before LISA WHITE HARDWICK, P.J., JAMES M. SMART, JR., J., and JAMES WELSH, SP. J.

JAMES M. SMART, JR., Judge.

Jeanne Mancuso appeals the trial court's dismissal of her petition against Long Beach Acceptance Corporation for failure to state a claim for statutory damages under Missouri's Uniform Commercial Code. The judgment is affirmed.

Background

In July 2002, Jeanne Mancuso purchased a vehicle from Adams Chevrolet in Raytown, Missouri. She financed the purchase by executing a "retail installment contract and security agreement," which granted Adams a security interest in the vehicle. The contract required Ms. Mancuso to maintain property insurance on the vehicle. Adams subsequently assigned the contract to Long Beach Acceptance Corporation.

Ms. Mancuso defaulted on the loan contract. The record does not clarify the nature of her default. On May 28, 2003, Long Beach repossessed the vehicle.

The next day, Long Beach sent Ms. Mancuso a "Notice of Our Plan to Sell Property." It advised her, inter alia, that the vehicle would be sold at a private sale after a certain date and informed her of the steps she must take to redeem the vehicle. The notice substantially followed the suggested language of section 400.9-614(3),¹ the "safe-harbor" format. It indicated that in order to redeem the vehicle, Ms. Mancuso would be required to pay the full amount due. It also included the following provision:

In addition to paying us the full amount you owe to get the vehicle back (payment in certified funds), you will also be required to provide us with proof of proper insurance coverage, and you may be required to provide us with proof that all checks ... you have already issued to us ... in the last 30 days have cleared.....

Ms. Mancuso did not redeem the vehicle, and Long Beach eventually sold it at auction.

On December 28, 2004, Ms. Mancuso filed a petition against Long Beach in Jackson County Circuit Court. She sought to recover statutory damages under section 400.9-625 of Missouri's version of the Uniform Commercial Code (UCC), based on her claim that Long Beach's notice did not comply with section 400.9-614 of the UCC. She specifically complained that the "proof of proper insurance" language was misleading and misstated her redemption rights. She also sought class action certification under Rule 52.08.

Long Beach removed the case to federal court. There, Long Beach filed a motion to dismiss for failure to state a claim upon which relief could be granted. Long Beach argued that its notice did not violate section 400.9-614, because it had the right to require Ms. Mancuso to fulfill all of her obligations under the contract before redemption. This included the obligation to keep the vehicle insured until the loan was paid in full. Thus, Long Beach claimed, its requirement for proof of that insurance coverage was neither improper nor misleading. Mancuso responded that if the entire balance were to be paid in full, then Long Beach would have no right to require proof of insurance, because, at that point, it would no longer have any interest in the collateral. The federal court did not rule on the motion to dismiss. Instead, the court granted Ms. Mancuso's motion to remand to state court.

On remand, the record of the federal proceedings, including the motion to dismiss, was filed in the state court pursuant to Missouri Supreme Court Rule 55.34. The state court, after considering the motion to dismiss and the suggestions in opposition, dismissed the petition without specifying the basis for the ruling.

Ms. Mancuso appeals, contending that the court erroneously applied the law in dismissing her petition for failure to state a claim for statutory damages under section 400.9-625.

Standard of Review

A dismissal for failure to state a cause of action is reviewed de novo. Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 768 (Mo. banc 2007). Such a motion is a test solely of the adequacy of the petition. Id. We assume that the averments in the petition are true and liberally grant all reasonable inferences flowing therefrom. Id. With that in mind, we review the petition to determine if the facts pleaded and their reasonable inferences state any grounds for relief. Rychnovsky v. Cole, 119 S.W.3d 204, 208 (Mo.App. 2003). Where the trial court does not state its reasons for granting the dismissal, we presume that it was based on the grounds stated in the motion. Id. We will affirm if dismissal was appropriate on any of those grounds. Id.

Ms. Mancuso asserts that the sufficiency of the notice in this case may be determined as a "matter of law." Long Beach seems to agree. We agree also. Perhaps in some cases the reasonableness of the notice may be a question of fact. See, e.g., Boender v. Chicago N. Clubhouse Ass'n, Inc., 240 Ill.App.3d 622, 181 Ill.Dec. 134, 608 N.E.2d 207, 213 (1992); McCoy v. Am. Fid. Bank & Trust Co., 715 S.W.2d 228, 230-31 (Ky.1986); see also 68A Am.Jur.2d Secured Transactions sec. 617. In a case such as this, however, where there is no dispute as to the notice given, and the issue is whether the terms set forth in the notice misrepresent the debtor's redemption rights, the reasonableness of the notice may be decided as a matter of law. See City Nat'l Bank of Fort Smith v. Unique Structures, Inc., 929 F.2d 1308, 1311-12 (8th Cir.1991); Topeka Datsun Motor Co. v. Stratton, 12 Kan.App.2d 95, 736 P.2d 82, 88-89 (1987); see also Anderson's Uniform Commercial Code sec. 9-504:170 (3d ed.).

Our review of legal issues seeks to determine whether the trial court erroneously declared the law or misapplied the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Issues of statutory interpretation are reviewed de novo. Ochoa v. Ochoa, 71 S.W.3d 593, 595 (Mo. banc 2002).

Statutory Framework

The issues raised in this appeal require an analysis of certain provisions of Article 9 of the UCC. Part 6 of Article 9 defines the rights and remedies of the parties and sets forth the proper procedures after a debtor has defaulted on his obligations under a security agreement. See 4 James J. White & Robert S. Summers, UNIFORM COMMERCIAL CODE sec. 34-1 (5th ed.2002). Those procedures begin with section 400.9-609,² which permits a secured party following a default to "take possession of the collateral," or to repossess it. Pursuant to section 400.9-610, the secured party may dispose of the collateral, by sale or otherwise, so long as every aspect of the disposition is "commercially reasonable."

At issue in this case are the specific pre-sale "notice" requirements the secured party must follow before selling the repossessed collateral. Section 400.9-611(b) requires a secured party to provide the debtor with reasonable notice of its intent to sell the collateral. The content of the notice for consumer transactions, such as this, is dictated by section 400.9-614. Subsection (1) of that statute sets out what must be included in the notice. Section 400.9-614(1).³ The statute does not require that the notice use any "particular phrasing." Section 400.9-614(2). Section 400.9-614(3) sets forth a format, which, if used, "provides sufficient information."⁴ This is referred to as the "safe-harbor" format. See section 400.9-614, cmt. 3. Additional information may be included in the notice, pursuant to section 400.9-614(4), and an error in non-required information is allowed so long as it is not "misleading" as to redemption rights. Section 400.9-614(5).

A creditor is held to the requirement of strict compliance with these notice provisions. Boatmen's Bank of Nev. v. Dahmer, 716 S.W.2d 876, 877 (Mo.App. 1986). Any doubt about what constitutes strict compliance is resolved in the debtor's favor. Id. A debtor's remedies for the secured party's failure to comply with these notice requirements can be found at section 400.9-625. It provides, in part, that where the collateral is consumer goods and the secured party fails to comply with the provisions of Part 6 of Article 9, the debtor

may recover for that failure in any event an amount not less than the credit service charge plus ten percent of the principal amount of the obligation or the time-price differential plus ten percent of the cash price.

Section 400.9-625(c)(2).

Standing

Ms. Mancuso does not claim that any deficiency of the notice precluded her from exercising her right of redemption, or caused her damage in any other way. Nevertheless, she has standing to bring this action. The statutory subsection "provides a minimum, statutory, damage recovery for a debtor" independent of a showing of damage. Section 400.9-625, cmt. 4. It is "designed to ensure that every noncompliance with the requirements of Part 6 in a consumer-goods transaction results in liability, regardless of any injury that may have resulted." Id.

Ms. Mancuso Claims the Requirement of Proof of Insurance is an Unlawful and Misleading Post-Redemption Requirement

Ms. Mancuso contends that her petition stated a valid claim for statutory damages under section 400.9-625 and, thus, should not have been dismissed. Her petition alleged that Long Beach failed to comply with the notice requirements in Article 9 by wrongly requiring her to provide proof of insurance, in addition to tendering full payment, in order to redeem the vehicle. She claimed that the notice did not comply with section 400.9-614(5), because it is

seriously misleading and misstates debtors' redemption rights arising under Article Nine by imposing an unlawful post-redemption requirement of proof of insurance coverage after Long...